-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D7xax94drkg0Yu8gqRb10B3hOsjbDStSTPSosH6YLAfI6AFH+9cQIAHPH8s5rhox Zm34tcVOnvCFnjltxHSa8g== 0000950169-97-000009.txt : 19970110 0000950169-97-000009.hdr.sgml : 19970110 ACCESSION NUMBER: 0000950169-97-000009 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19970109 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXOTECH INC CENTRAL INDEX KEY: 0000034047 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 540700888 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-04076 FILM NUMBER: 97502957 BUSINESS ADDRESS: STREET 1: 8502 DAKOTA DR CITY: GAITHERSBURG STATE: MD ZIP: 20877 BUSINESS PHONE: 3019483060 MAIL ADDRESS: STREET 1: 8502 DAKOTA DR CITY: GAITHERSBURG STATE: MD ZIP: 20877 FORMER COMPANY: FORMER CONFORMED NAME: RADIATION SYSTEMS INC DATE OF NAME CHANGE: 19681121 10-K/A 1 EXOTECH SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. FORM 10-K (AMENDED 6 JANUARY 1997) ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED: JUNE 30, 1996 COMMISSION FILE NO. 0-4076 EXOTECH INCORPORATED (Exact name of Registrant as Specified in Charter) State or Jurisdiction of Incorporation or Organization: DELAWARE IRS Identification No: 54-0700888 Address of Principal Office: 8502 Dakota Drive Gaithersburg, MD. 20877 Registrant's Telephone Number: (301) 948-3060 SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE EXCHANGE ACT None SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT Common Stock par value $0.10 per share. Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [x] No [ ] At June 30, 1996, 942,387 shares of Common Stock were outstanding, and the aggregate market value of the Common Stock of Exotech Inc. held by nonaffiliates was approximately $56,750. DOCUMENTS INCORPORATED BY REFERENCE NONE PART I ITEM 1. GENERAL DESCRIPTION AND BUSINESS ACTIVITIES A. General - There have been no changes in the organization of the Company during the past fiscal year. The Company has been neither a party to, nor contemplates, any actions of bankruptcy, receivership, or reorganization during the past or current fiscal years. No material assets were acquired, no acquisitions or dispositions are anticipated. The basic nature and conduct of the business is expected to continue as in the past. B. Financial information about industry segments - In the opinion of Management, the Company has one industry segment: (1) electro-optics and electronic instrument systems and related services. 1. Electro-optics products - The Company's principal products are: (1) a laser bacteria colony counter used in food and drug processing and laboratory testing environments, (2) a printed circuit board (PCIB) which interfaces the laser-scanner instrument with many models of the personal computers, (3) a crystallographic scanner that evaluates the lattice structure orientation of semiconductor crystals on the basis of surface morphology measurements, (4) a hand-held four channel-ground truth radiometer used for earth resource studies in conjunction with the LANDSAT satellite and also independent studies, and (5) an automated spiral plater that precisely and rapidly dispenses microbial samples onto rotating agar plates used in laboratories performing bacterial enumeration work. These products are currently marketed world-wide. Spiral Biotech, Inc. is the exclusive representative of products 1, 2 and 5. These products and related service work have accounted for up to approximately 93 percent of the Company's sales in the last two fiscal years. The others are sold directly by the Company. They are built for inventory in lots of 25 units, with two or more lots of the well established products generally being sold in about one year. It is intended that these products will be updated periodically to keep them abreast of new technological developments and will remain products of the Company. In December 1994 the Company accepted a contract from Spiral Biotech, Inc. to design an automated spiral plater (Autoplate) to replace the model that was being imported from Holland. In May 1995 a demonstration model of the instrument was delivered and subsequently the Company received an order for 22 production units. This production was scheduled for the first six months of fiscal year 1996. A modulation transfer function (MTF) tester, used for quality control in the manufacture of low light level image intensifier tubes, is not in regular production but would be manufactured to fill customers' orders. This instrument was initially produced for the U. S. Army and delivered during fiscal year 1979. The Company developed an adapter assembly for these test instruments that updates them to test the latest versions of image intensifier tubes. Over the past fifteen years the Company has provided support to the U. S. Army and its contractors in the form of repair maintenance and calibration services. The contracts for these services were fixed price. There was a government contract for these services in the past fiscal year and purchase orders for calibration services in the current fiscal year are being received from government contractors using five of the MTF tester systems. The Crystallographic Scanner, developed in fiscal year 1987, redesigned into a manufacturing model in fiscal year 1988, was put into production in 1989. The first unit was delivered to the customer in May 1989. An active marketing effort through correspondence and personal contacts, as well as personal presentations, is continuing to introduce this product to semiconductor crystal growers, A-2 processors and manufacturers. However, there have been no sales of this instrument over the past four years. The Company is currently engaged with the National Institute of Standards and Technology in a cooperative R&D agreement with the objective to calibrate the Exotech Scanner method with respect to the Bragg Angle method of determining crystal axis orientation. Validation of our instrument's capability vis-a-vis the X-ray methods will overcome a persistent impediment to sales of Exotech's Scanner to producers of semiconductor wafers. There are well-known potential customers that show continued interest in the scanner, but must be convinced of correlation with the traditional X-ray results. Some of the component parts for the products discussed above are fabricated to the Company's specifications and design. Other parts are standard electronic or optical components available off-the-shelf. The availability of these components is dependent upon several independent manufacturers and distributors. Delays due to strikes, material availability or scheduling problems could adversely affect the Company's assembly and delivery schedules. A few parts have only one source; however, the suppliers are proven, reliable businesses. The Company does not rely on foreign sources for raw materials, other than to the extent U. S. manufacturers acquire their supplies overseas. An energy crisis or fuel shortage would have no more of an adverse effect on the Company than on other firms requiring lighting, heat and modest amounts of electric power for offices and shops. Among its current electro-optical products the Company holds an exclusive license and foreign patent applications on the Crystallographic Scanner. There are little or no seasonal variations in the business, other than for radiometers which tend to attract greater interest during the spring and fall seasons. Working capital is a continuing problem for the Company. There is currently no working capital financing available through a financial institution, although producer loans made by Spiral Biotech, Inc. were used to finance colony counter production in prior fiscal years. The limited availability of working capital results in occasional cash on delivery orders or delays in paying suppliers. All products are guaranteed as to parts and workmanship for a period of six months to one year. The only warranty work incurred in the past year was repair of two Model 4000 Autoplates and a Model 200 Vacuum Source at nominal cost. The colony counter, Autoplate, crystallographic scanner and radiometer products are used principally in the scientific research and high technology manufacturing communities and therefore customers tend to be concentrated in these areas of activities. Sales in July and August 1996 amounted to $70,300, comprising Autoplates, radiometers, vacuum sources and miscellaneous repair and calibration services. Backlog in this segment at June 30, 1996 was $279,000. Business performed for the Government is on a fixed-price basis and therefore not subject to renegotiation; however, the contracts could be terminated for non-delivery or failure to meet specifications. There are other manufacturers of the Company's products, most of them larger and with greater resources available to fund development and production. Competition is very keen for the available market. The Company strives to improve its existing products and produce highly reliable state-of-the-art instruments. 2. General Description of Business - Research and development by the Company in the past A-3 affected four products: (1) bacteria colony counters; (2) four channel radiometers, (3) data processors for bacteria colony counters and, (4) Model 500 Crystallographic Scanners. In fiscal year 1992, the Company, in collaboration with Spiral Biotech, Inc., engaged in development of computer controlled, stepper motor actuated automation for bacteria colony plating and counting instruments. The applications comprise coordinated precise motions on as many as four axes. The purpose of this work is to enhance the technological excellence and competitive edge of the next generation of the Company's products for the microbiological laboratory market. This work, completed in March, 1992, resulted in a colony counter with automated features, and a proof-of-concept and demonstration model of a new spiral plater instrument. Total expenditures for the spiral plater effort amounted to $63,000 of which $20,000 was funded by Spiral Biotech, Inc. The preliminary design of the new plating instrument was completed, and produced by Melvezi-Prolion, a development and manufacturing firm in Holland. Following the termination of importing of the instrument from Holland, the Company, early in 1995, designed a replacement instrument and, concurrent with development work, began production of 12 units on an order from Spiral Biotech, Inc. The order was increased to 22 units in November 1995, with the final unit of this lot shipped in February 1996. A follow-on order for 25 instruments resulted in shipments of 18 more units prior to June 30, 1996. In the biotechnology instruments business, autoplates, colony counters and related equipment sales accounted for 82% of the year's sales, 5% from the MTF parts, calibration and maintenance; and 13% from miscellaneous sales and repair work. For the fiscal year ended June 30, 1996, as has been the case for prior years, the Company's independent auditors' report has included an explanatory paragraph, following the opinion paragraph, describing the existence of a going concern uncertainty. Management has been advised that the principal cause of the going concern uncertainty is cash flow shortage which has caused delays in meeting some current obligations. It is the opinion of Management that progress in resolving cash flow related problems, although elusive in the past several years, will be re-established in fiscal year 1997 provided that modest increases in instrument sales, and maintenance and repair work continue and that ongoing demonstrations and trial applications of the Crystallographic Scanner result in sales of this product. Strengthening of revenues and stringent controls of costs are necessary to enable profits from operations to remedy cash flow problems. The capital expenditures, earnings and competitive position have not been affected by compliance with Federal, State or local regulations enacted to control the discharge of materials into the environment or otherwise relating to the protection of the environment. The Company and its subsidiary employ five persons; two are classified as professional and three as semi-professional. The Company did not conduct operations in foreign countries. A-4 ITEM 6. SELECTED FINANCIAL DATA Selected Income Statement Data:
---------------------------------- FISCAL YEAR --------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Net Sales $367,259 $370,102 $437,330 $435,813 $432,139 Income before Taxes & Extraordinary Credit (152,584) (68,130) (35,448) (23,854) (73,801) Net Income (Loss) (152,584) (68,130) (35,448) (23,854) (73,801) Per Share: Net Income (Loss) (.16) (.07) (.04) (.03) (.08)
Selected Balance Sheet Data:
---------------------------------- FISCAL YEAR --------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Current Assets $563,209 $587,808 $643,836 $597,081 $497,326 Current Liabilities 825,952 699,068 688,834 611,775 491,034 Working Capital (262,743) (111,261) (44,998) (14,694) 6,292 Total Assets 570,541 596,241 654,136 612,525 515,638 Stockholders' Equity and Accumulated Deficit $(255,411) $(102,827) $(34,698) 750 24,604
A-5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS. The Company's revenues of $367,259 were 1.0% lower than in fiscal year 1995, and 16% lower than in fiscal year 1994. The declines over these years related in part to organizational and personnel disruptions in the Company's principal customer for biotechnology instruments, Spiral Biotech, Inc., and the sub-par quality of an imported automated plater instrument, sold as a part of a system including Exotech products. The Company's new product has replaced this instrument. Sales of platers, laser bacterial colony counters and related accessory equipment increased to $302,700 compared to $89,800 in 1995 and $200,200 in 1994. There were no sales of radiometers nor Crystallographic Scanners, although radiometer sales were $16,400 and $27,700 respectively in 1995 and 1994. Service and parts sales for Modulation Transfer Function Testers were $17,350 compared to $9,000 and $57,000 respectively in 1995 and 1994. Service and maintenance sales for the broad range of laboratory instruments was down to $47,200 compared to sales of $146,700 in the prior year and $85,700 in fiscal 1994. Continued efforts to control the cost of sales resulted in an operating profit of $1,633 compared to $2,057 in fiscal year 1995 and a loss $8,812 in 1994. However, the impact of interest and research and development costs resulted in a net loss of $152,584 compared to losses of $68,130 and $35,448 in 1995 and 1994, respectively. An increase in demand notes needed to sustain development of a new automated plater instrument caused an increase in interest expense to $29,817 compared to $26,822 in the prior year, and $27,752 in fiscal 1994. A charge of $129,000 was incurred in the past year for research and development to search out the combination of electronic and mechanical technology needed to design and develop a state-of-the-art instrument with strong sales potential in a highly competitive market. In the opinion of Management, that objective was achieved through intense effort to deliver two preproduction prototypes and 14 units of the new instrument in the second quarter of fiscal 1996. In the third and fourth quarter of the past year, orders for instruments and services were increased by Spiral Biotech, Inc. bringing sales to about the level of the prior year and increasing backlog to $279,000 at June 30, 1996, compared to $81,000 one year earlier and $45,300 at the end of fiscal year 1994. In the opinion of Management, recent improvements in the marketing of the biotechnology products will rejuvenate sales of the laser scanner instruments together with increasing sales of the new automated plater. Despite financial limitations that have impeded marketing of the Crystallographic Scanner instruments, management believes that the results of on-going collaborative studies and demonstrations of capabilities will improve the prospects of sales to the potential customers who continue to show interest in that instrument system. Furthermore, management is committed to explore the prospects for collaborative arrangements with several well established suppliers of manufacturing equipment to the semiconductor producer industry as a means to generate increased exposure and sales potential for this product. Over the past three fiscal years, as in prior years, the independent accountants' report has included an explanatory paragraph, following the opinion paragraph, describing the existence of a going concern uncertainty. The accountants have advised Management that the principal cause for the going A-6 concern uncertainty is cash flow shortages which have caused delays in meeting current obligations. In the opinion of Management, the past three years of seriously depressed markets for the Company's products caused substantial impediments to overcoming the qualification stated by the accountants. Continued stringent control of costs and cash outlays has enabled the Company to sustain high quality and timely upgrades of its products while nurturing improved results from marketing efforts in a very competitive environment. With a new product now experiencing a good level of acceptance in the market, and growth in the Company's backlog for its other biotechnology-related products, Management believes that increasing revenue will provide for progress in generating sufficient cash to support operations in fiscal year 1997. Additionally, the opportunity to build on the results of our current activity will be pursued to reactivate sales of the Crystallographic Scanner instruments and technology. The Company continues to meet its cash flow obligations, although at times delayed in some cases of trade payables and payroll, with receipts from sales and financing activities comprised of loans from the Company's President and from Spiral Biotech, Inc., its principal customer. The loans from Spiral Biotech are secured by ordered instruments in progress and range from 30 to 40 percent of the purchase order value for the total order. No loans are in default. The fluctuations in accounts payable relate to the amount of work-in-progress for products on order. It is noted that the Company's property, plant and equipment are nearly fully depreciated. However, all essential items of these assets are maintained in good repair and no replacements nor additions are anticipated in the next year or more. The Company's management and employees continue to be committed to reestablishing progress toward our goal of profitability. A-7 EXOTECH INCORPORATED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED JUNE 30 Reference is made to Note 1 of the Notes to the Consolidated Financial Statements for a description of operations of the Company and to Note 2 for a description of the principal accounting policies followed by the Company.
1996 1995 1994 ---- ---- ---- REVENUES Contract Sales $367,259 $370,102 $437,330 COST OF SALES Direct Cost and Overhead 364,448 363,721 441,390 General and Administrative 1,178 4,324 4,752 ----- ----- ----- TOTAL COST OF SALES 365,626 368,045 446,142 ------- ------- ------- OPERATING PROFIT (LOSS) 1,633 2,057 (8,812) OTHER REVENUES (EXPENSES) Miscellaneous 4,600 (43,365) 1,116 R&D Costs (129,000) -- -- Interest (29,817) (26,822) (27,752) -------- -------- -------- NET LOSS BEFORE TAXES (152,584) (68,130) (35,448) INCOME TAXES -- -- -- -------- -------- -------- NET LOSS $(152,584) $(68,130) $(35,448) ========== ========= ========= Loss per Common Share (.16) (.07) (.04) Weighted average number of common shares outstanding 942,387 942,387 942,387
The accompanying notes are an integral part of these statements. A-8 EXOTECH INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) DISCUSSION OF OPERATIONS AND REALIZATION OF ASSETS For the fiscal year ended June 30, 1996, the Company had an operating profit of $1,633. The Company had an operating profit of $2,057 in the prior fiscal year. At June 30, 1996, approximately $75,000 of accounts payable were more than 30 days old. The accompanying financial statements have been prepared on the "going concern" basis of generally accepted accounting principles. The ability of the Company to continue normal operations is dependent upon its ability to obtain the required amounts of working capital to finance the existing contracts, to continue the acquisition of additional contracts, and to pursue instrument sales at prices sufficient to recover costs and some profits. Inventory of Crystallographic Scanners have experienced no sales activity since their development approximately four years ago. Efforts have recently been intensified to develop a marketing agreement with an established marketer of capital equipment to the crystal growers and processors, or alternatively to sell the products, design package, software, patents and licenses to larger manufacturers of instruments with a significant presence in the semiconductor processing equipment market. Should those efforts fail, the company may be forced to charge off the carrying value of approximately $243,000 against income. At June 30, 1996, the remaining value (backlog) of existing sales contracts were approximately $279,000. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company is a manufacturer of Electro-optical instruments. It performs the research and development required for those products. Principle of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its subsidiary, after elimination of all significant intercompany transactions. Revenue Accounting The Company records revenue earned based on shipments of units of its products. Inventory Finished goods inventory is stated on the basis of the lower of costs (average) or market value. Depreciation and Amortization The Company uses a straight-line method of depreciation and amortization for both tax and financial reporting purposes. The following time periods are used: DEPRECIATION: Laboratory equipment 5 or 8 years Office furniture and equipment 5 years A-9 AMORTIZATION: Leasehold improvements Life of lease Patents 12 years Depreciation expenses recorded in the consolidated statement of operations are as follows: 1994 - $3,809, 1995 - $2,454, and 1996 - $1,101, including amortization of patents at the rate of $928 in each year. The Company's limit for capitalization of property and equipment is $500 or more. Income Taxes Provisions for income taxes are based on pre-tax income reported in the financial statements, using the guidance of Financial Accounting Standards Board Statement No. 109 (FAS #109) "Accounting for Income Taxes." Differences between income (loss) for financial reporting purposes and tax reporting arise from (a) the capitalization and amortization of research and development costs for income tax reporting purposes, but deducting these costs as expenses in the period incurred for financial statement purposes; and (b) timing differences in deducting net losses on contracts. There were no provisions for income taxes required in the three year period ended June 30, 1996 due to the operating losses for each of those years. At June 30, 1996, the Company had net operating loss carryforwards of $371,357 which begin to expire in 1997. The Company also has incurred research and experimental expenses of $129,000 in 1996, and $54,368 in prior years that have been capitalized to be amortized over a sixty month period for income tax purposes, but have been expensed in the period incurred for financial statement reporting. While the accounting standard allows companies to recognize a deferred tax asset on the tax effect of these timing differences, the Company has provided a valuation allowance for the full amount since it is more likely than not the deferred tax asset will not be realized. The approximate tax effect of the carryforward and temporary difference for the three years ended June 30 consist of:
1996 1995 1994 -------- -------- ------ Net operating loss carryforward $148,543 $150,545 $119,923 Deferred research and experimental expenses 48,174 5,204 8,673 Less: Valuation allowance (196,717) (155,749) (128,596) --------- --------- --------- Deferred Tax Asset - net - 0 - - 0 - - 0 - ========= ========= ========= Net increase in valuation allowance $(40,968) $(27,153) ========= =========
Following is a table reconciling the Company's accounting net loss for each of the last three years ended June 30.
1996 1995 1994 ------- ------- ------- Accounting Net Loss $152,584 $68,130 $35,448 Nondeductible expense (250) Research and experimental costs: Capitalized on tax return (129,000) - - Tax amortization 21,574 8,674 9,874 -------- -------- -------- Taxable Net Loss $ 45,158 $ 76,554 $ 45,322 ======== ======== ========
A-10 Repairs and Betterments Repairs are expensed as incurred. Betterments are capitalized and amortized over the remaining useful life of the assets. Accounts Receivable Accounts receivable consist of amounts billed from sales as of June 30, 1996. In the prior fiscal year an allowance for doubtful accounts was set up for $43,368. This amount represents a claim for product development costs from fiscal year ended June 30, 1994. This amount has since been written off, and there is no allowance for doubtful accounts as of June 30, 1996, as the Company considers accounts receivable to be fully collectible. Cash And Cash Equivalents The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. (3) INVENTORY Inventories are summarized as follows: 1996 1995 ---- ---- Raw Materials $32,625 $ 32,625 Goods in Process 505,062 528,825 Finished Goods 14,000 14,000 --------- --------- $551,687 $575,450 (4) RESEARCH AND DEVELOPMENT COSTS The Company's accounting policy is to write off research and development costs as incurred. In the fiscal year 1996, $129,000 of R&D costs related to the new Autoplate 4000 product were incurred and written off. There were no R&D costs in the prior two years. (10) TRANSACTIONS WITH SHAREHOLDERS Sales to a company owned by a shareholder aggregated $340,841, $335,736 and $340,397, (about 93, 91 and 78 percent, respectively, of total sales) for the fiscal years ended June 30, 1996, 1995 and 1994, respectively. Amounts due from such sales at June 30, 1996 and 1995 were $11,073 and $10,932, respectively. Sales were consummated on terms similar to those prevailing with unaffiliated customers. A-11 (12) VALUATION AND QUALIFYING ACCOUNTS The following is a schedule of Valuation and Qualifying Accounts:
Additions: Balance Charged to Balance Beginning Costs and End of Description of Period Expenses Deductions Period ----------- --------- -------- ---------- ------ Allowance deducted from asset to which it applies: Allowance for Doubtful Accounts: Year Ended June 30, 1995 $ -- 0 -- $43,368 $43,368(A) $ -- 0 -- Allowance for Depreciation: Year Ended June 30, 1996 230,946 174 231,119 Year Ended June 30, 1995 229,420 1,526 230,946 Year Ended June 30, 1994 226,539 2,881 229,420 Allowance for Amortization of Patents: Year Ended June 30, 1996 6,959 928 7,887 Year Ended June 30, 1995 6,031 928 6,959 Year Ended June 30, 1994 5,103 928 6,031
Note (A): Uncollected receivables written off. A-12 Linton, Shafer & Company, P.A. Certified Public Accountants 6 West Second Street Frederick, MD 21701 301-663-5122 Principals: Edmond B. Gregory III, CPA, CBA Kevin R. Hessler, CPA Donald C. Linton, CPA, CFP Joseph M. McCathran, CPA Ronald W. Shafer, CPA Consent of Certified Public Accountants We have issued our report dated September 20, 1996, accompanying the financial statements and schedules of Exotech, Incorporated and Subsidiary contained in the annual report on Form 10-K of Exotech, Incorporated and Subsidiary as of June 30, 1996 and 1995, and for the years ended June 30, 1996, 1995 and 1994. We consent to the use of the aforementioned report in the amendments to Form 10-K, as amended January 6, 1997. /s/ Linton, Shafer & Company, P.A. __________________________________ January 6, 1997 A-13 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (a), (b), (e) NAME: ROBERT G. LYLE (67) President, CEO of the Company and subsidiary; Director Business experience during past 5 years Same as above, since 1977 Other Positions: None Other Directorships: None NAME: JAMES G. PAULI (41) Treasurer (2) and Director (4); Member of Audit Committee (4) Business experience - Managing Consultant, Leader of during past 5 years Management Study Teams at Electronic Data Systems, Inc., Herndon, VA Data Systems Consultants and Designers (1) - Management Analyst, Price Waterhouse Audit and Management Consulting Firm (5) Other Positions: None Other Directorships: None NAME: ANDREW WONG (43) Secretary and Director (1); Member of Audit Committee (1) Business experience - Vice President, Marketing, General during past five years Electric-Spacenet, McLean, VA (1). Manager of Marketing Function for Telecommunications Division. Responsible for selling customized private networks to businesses in the United States and international markets. - Director, Business Development, COMSAT Mobile Communications, Bethesda, MD (4). Responsible for identification, analysis and implementation of mobile wireless communications business opportunities. Other Positions: None Other Directorships: Member, Board of Engineering Advisors, Univ. of California, Lawrence Livermore Laboratory (2) - ---------------------- Note: All terms expire in December, 1997 c. Not applicable. d. There are no family relationships between any of the above listed directors and any other director or executive officer of the Company. f. None of the directors or executive officers have been subject to any bankruptcy or insolvency proceedings, criminal proceedings, or injunctions against dealing in investments during the past three years. A-14 ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS A. No individual in management received remuneration of $100,000 or more. Officers as a group of three people received no payments except for $3,900 in disbursements for the group health and life insurance premiums for the Chief Executive Officer. B. No annuity, pension or retirement benefits are proposed to be paid to any director or officer in the event of his retirement. No remuneration payments are proposed to be made in the future, directly or indirectly, to any director or officer by the Company or its subsidiary pursuant to any existing plan or arrangement. C. There are no fees paid to directors for services in that capacity. D. No officer, or director of the Company: (1) received options during the reporting period; or (2) exercised options during the reporting period, or (3) held options as of September 1, 1996. The officers and directors of the Company as a group did not: (1) receive options during the reporting period, or (2) exercise options during the reporting period, or (3) hold options as of September 1, 1996. E. Termination of employment - the Company has no employment termination agreements with officers or employees. A-15 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of September 27, 1996, the information with respect to common stock ownership of each person known by the Company to own beneficially more than 5% of the shares of the Company's common stock, par value $0.10 per share, and of all officers and directors as a group: AMOUNT AND NATURE OF % NAME AND ADDRESS BENEFICIAL OWNERSHIP CLASS Carter C. Chinnis Of Record 90,244 303 N. Vine Street Beneficially 1,200 Richmond, VA 23220 Total 91,444 9.70 Robert G. Lyle Of Record 68,242 7.24 41957 Brightwood Lane Leesburg, VA 22075 William T. Stephens Of Record 96,449 10.23 PO Box 1096 McLean, VA 22075 Denzil C. Pauli Of Record 204,547 21.70 13021 Bluhill Road Aspen Hill, MD 20906 Calvin S. Koonce Of Record 102,100 10.83 6550 Rock Spring Drive Bethesda, MD 20817 Samuel Schalkowsky Of Record 92,076 9.77 4003 Woodlawn Road Chevy Chase, MD 20014 Current officers and directors as a group own a total of 68,242, representing 7.24% of Common Stock. A-16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K A. 1. LIST OF FINANCIAL STATEMENTS IN PART II OF THIS REPORT. PAGE NO. -------- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS................. 10-11 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THREE YEARS ENDED JUNE 30, 1996............................................... 12 CONSOLIDATED BALANCE SHEETS - JUNE 30, 1996 AND 1995............... 13-14 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED JUNE 30, 1996......................................... 15 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT - FOR THE THREE YEARS ENDED JUNE 30, 1996.............. 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS......................... 17-22 Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. Individual financial statements of the Company are omitted because it is primarily an operating company and the subsidiary included in the consolidated financial statements being filed in the aggregate does not have minority equity interests and/or indebtedness to any person other than the parent in the amounts which together exceed 5% of the total consolidated assets at the date of the latest balance sheet filed excepting indebtedness incurred in the ordinary course of business which is not overdue and which matures within one year of its creation, whether evidenced by securities or not, and indebtedness which is collateralized by the parent by guarantee, pledge, assignment or otherwise. A. 2. PARENT AND SUBSIDIARY The Company has no parent. The subsidiary of the Company is: NAME: EXOTECH RESEARCH & ANALYSIS, INC. STATE OF INCORPORATION: DELAWARE SECURITIES OWNED BY THE COMPANY: COMMON STOCK, 100% The foregoing is included in the consolidated statements of the Company and subsidiary. A-17 A. 3. EXHIBITS 1. Exhibit No. 1 is the Restated Certificate of Incorporation of the Company which is hereby identified as a BASIC DOCUMENT. The document was originally filed pursuant to a Registration Statement (Form S-1) filed on November 8, 1968, and is incorporated herein by reference. 2. Exhibit No. 2 is the By-Laws of the Company as revised amended on April 16, 1971, which is hereby identified as a BASIC DOCUMENT. The document has been filed pursuant to FORM 10-K for the fiscal year ended June 30, 1971, and is incorporated herein by reference. 3. Exhibit No. 3 is a specimen copy of a certificate for the Company's common stock, par value $.10 per share, which is hereby identified as a BASIC DOCUMENT. The specimen was filed pursuant to a Registration Statement (form S-1) filed on November 8, 1968, and is incorporated herein by reference. (a) Exhibit No. 3a is a specimen copy of a certificate for the Company's common stock, par value $.10 per share, reprinted due to exhaustion of the initial supply. This specimen copy was identified as a BASIC DOCUMENT. This exhibit was filed with Form 8 for the fiscal year ended June 30, 1975, and is incorporated herein by reference. 4. Exhibit No. 4 is a CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION - - EXOTECH SYSTEMS, INC. changing its name to EXOTECH RESEARCH AND ANALYSIS, INC. certified by the Secretary of the State of Delaware on the 12th day of August 1975, which is identified as a BASIC DOCUMENT. The document was originally filed with the Form 10-K for the fiscal year ended June 30, 1976, and is incorporated herein by reference. 5. Exhibit No. 5 hereto is a CERTIFICATE OF OWNERSHIP AND MERGER merging EXO-REALTY, INC. into EXOTECH INCORPORATED, certified by the Secretary of State, State of Delaware on the 28th day of June, 1976, which is identified as a BASIC DOCUMENT. The document was originally filed with the Form 10-K for the fiscal year ended June 30, 1976, and is incorporated herein by reference. B. No Form 8-K reports were filed in the fiscal year covered in this report. A-18 SIGNATURE Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of 1934, the Company has duly caused this amended Report to be signed on its behalf by the undersigned, thereunto duly authorized. January 7, 1997 BY: /s/ Robert G. Lyle _______________ ___________________________________________ DATE ROBERT G. LYLE, CHIEF EXECUTIVE OFFICER, PRINCIPAL ACCOUNTING OFFICER AND DIRECTOR January 7, 1997 BY: /s/ James G. Pauli _______________ ___________________________________________ DATE JAMES G. PAULI, TREASURER AND DIRECTOR January 7, 1997 BY: /s/ Andrew Wong _______________ ___________________________________________ DATE ANDREW WONG, SECRETARY & DIRECTOR A-19 -----END PRIVACY-ENHANCED MESSAGE-----